Please read this before making any travel arrangements to Portugal
We have experienced over the last year a high amount of clients arriving here in the Algarve wanting to purchase a property without having all of their finances in place. This has caused a great deal of upset as clients deciding on a property have then pursued financial assistance both here in Portugal and back in the UK, and although have been promised quick decisions have been very disappointed at the time taken to formally accept or decline the offer of a mortgage or loan. In the meantime additional expenses have been incurred such as air travel/hotel/car hire etc. As well as valuations sometimes required by lenders. This has happened due to lack of understanding on what documents are required to successfully apply for a mortgage here in the Algarve whilst on your visit. In some cases the whole process has taken 3-4 months and during this time the property has been sold to another client by another agent causing distress and serious loss of money. We feel that this has happened far too many times this year due to the high demand on property aimed at the rental market where purchases have been completed quickly in time to gain this years rental return. Therefore we would recommend having at least 30% of your expected budget available as a deposit. It is then possible to add a condition to the promissory contract allowing the buyer to back out of the purchase without losing the deposit if the lender refuses to agree a loan for the property declared in the contract. This way you are able to come over find the property of your dreams and secure the sale of the property pending an agreement from your lender. This will take the property off the market and prevent the property from being sold to another client.
It is not a good idea to come out to Portugal in search of a property if you are dependant on selling a property first. This will almost certainly end in disappointment. The market in the UK has begun to settle and buying in this way is very dangerous especially if a promissory contract has been signed as you are legally obliged to purchase the property on the agreed deed date, failure to do so will result in the loss of your deposit. We are here to help, and we really do not want you to undergo any unnecessary stress and heartache when it can be easily avoided.
If you would like further advise, then please call us or drop us an email.
The most important recommendation we can make to you is, do not sign anything until you have attained competent and independent legal advice.
Buying a new property can be a daunting prospect with all the legal processes to consider and more so in a foreign country, where the language and purchase law is far different. However, with our help and a reputable legal advisor there will be no need for concern when buying your new home in Portugal.
We will guide and assist you through the buying process once you have found the property you wish to purchase. The next step is to contact a lawyer. Your legal advisor will require full information on the property, which we will provide, and then will commence the process as follows:
Land Registry. A search will be made to check the land registry title at the local municipality. Where appropriate, checks on licences and permissions will be made
Inland Revenue. A search will be made to ensure tax registration on the property and there are no charges that may adversely affect the property.
Taxation Number. Your lawyer will apply for your fiscal number through the local Tax Office. Your fiscal number will be required for many transactions, including opening a bank account in Portugal.
Contract. A promissory contract is drawn up between purchaser and vendor. At this stage a deposit of between 10% and 40% is required. (Dependant on vendor) This is a legally binding contract and should you wish to withdraw from the purchase then you will forfeit the deposit. In the event that the vendor defaults, then they must repay double the deposit.
SISA tax – Will be replaced by a new tax called IMT which will have lower rates than the current tax. Thus, the maximum rate will be 6%, instead of 10% as before, and the exemption limit has been increased. Please see the chart below.
|IMT Tax Scale HOLIDAY / BUY TO LET||Percentage||Deductions|
|From 92,407 until 126,403||2%||924,07|
|From 126,403 until 172,348||5%||4,716.16|
|From 172,348 until 287,213||7%||8,163.12|
|From 287,213 until 550,836||8%||11,035.25|
|Up from 550.836||6% Flat|
|IMT Tax Scale PERMANENT DWELLING||Percentage||Deductions|
|From 92,407 until 126,403||2%||1,848.13|
|From 126,403 until 172,348||5%||5,640.23|
|From 172,348 until 287,213||7%||9,087.19|
|From 287,213 until 574,323||8%||11,959.32|
|Up from 574.323||6% Flat|
Buying Land for Construction 6.5%
Buying Rural/Rustic Properties 5%
Buying Commercial Property 6.5%
Purchasers registered in black-listed or offshore jurisdiction 10%
Final Deed. Your official property deed. The signing of the Escritura must be in the presence of a Notary official. All parties must attend the Notary office and proof of payment be identified before the Notary.
Legal Fees It is important that you are aware of the approximate costs involved prior to signing the promissory contract. Your legal representative will be able to advise of all the costs including land registry, notary fees, IMT tax, and their own fee (normally 1.25% 1.75%). It is important to note that vendors are not required to pay any part of the fees towards your purchase of their property.
In the case of new build properties, it is customary for payments to be made in stages as the works progress. Your legal advisor will ensure that certificates are attained at each agreed level of construction.
You should be aware that many of the service charges relating to your new property are payable on a monthly basis and not charged quarterly as in the UK.